One of China's Top GPU Companies, Muxi Shares, is About to See a Large-Scale Stock Release: The Carnival of Unrealized Profits and Hidden Profit Concerns Behind a Market Value of 6.8 Billion
Summary of Key Points
In simple terms, Muxi Shares, a leading Chinese GPU company, is about to experience its first large-scale stock release since going public on September 17th, allowing the shares held by early investors to be sold on the market. This release involves approximately 14 million shares, valued at a whopping 6.83 billion yuan based on the current stock price.
Although Muxi Shares' stock price has dropped significantly from its peak, early investors still hold a huge unrealized profit of 367% (more than doubling their investment). The market is nervous because its competitor, MooreThread, experienced a sharp drop in its stock price immediately after its shares were released to the public, raising concerns that Muxi might follow the same path.
A deeper issue is that, despite Muxi's financial report for the first half of the year showing a turnaround from loss to profit of 600 million yuan, this was mainly due to non-core business activities such as government subsidies. Its main business of selling chips is still in the red. Coupled with high research and development costs, tight cash flow, and limitations in the supply chain, whether Muxi can truly establish itself as a leader in the domestic chip industry will depend on the sales performance of its new products.
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Detailed Analysis: Five Dimensions of Muxi Shares' Current Situation
1. The Pressure of Stock Release: A Major Test for a Market Value of 6.8 Billion – Will Investors Sell?
Simple Explanation:
This is like a newly opened internet-famous restaurant that received investment from "angel investors" at the opening. Now that the restaurant has become popular (the stock price has risen), these investors, whose shares were previously locked up and couldn't be sold, can sell them at any time to realize a profit.
- Significant Stock Release: The 13.966 million shares to be released will increase the company's outstanding shares by about 75%. Imagine if there were only 100 shares trading before, and suddenly 75 more are added; if everyone wants to sell, the price will likely drop.
- Investors with Huge Profits: These shares were acquired by institutional investors such as public funds, social security funds, and insurance companies through private placements before the company went public. At the closing price of 489 yuan on September 11th, they bought the shares for 104.66 yuan each, meaning they could now make a profit of 384 yuan per share, for a total unrealized profit of 367%.
- Why the Anxiety? Look at MooreThread, another of the top Chinese GPU companies. Its stock price plummeted on the day of its stock release and fell by 30% in the following week. Market sentiment is fragile, and there are fears that Muxi will follow the same pattern. Although Muxi's current stock price has dropped from its peak, investors still have a strong incentive to sell and make a profit.
2. The “Magic” of the Financial Report: Why Is the Main Business Still Losing Money Despite a Profit of 600 Million?
Simple Explanation:
To determine whether a company is truly profitable, you can't just look at the net profit figure; you need to break it down. Muxi's financial report for the first half of the year looks good on the surface:
- Preliminary Success: Revenue increased by 44% to 1.324 billion yuan, and net profit turned from a loss to 612 million yuan.
- The Truth: Of this 612 million yuan in profit, 661 million yuan came from non-recurring gains, such as government subsidies and investment income. The company itself has stated that these gains are not sustainable.
- Main Business Still Losing Money: Excluding these one-time gains, Muxi's chip-selling business actually lost 48.8595 million yuan. Although this is a 75% reduction from last year's loss, it is still in the red. This indicates that Muxi has not yet reached a stage where it can support itself solely through product sales.
3. The Cost of Innovation: The Hidden Dangers of Research and Development and Inventory
Simple Explanation:
Chip development is extremely costly, especially for domestic companies, which often have to develop their own technologies from scratch.
- High R&D Expenses: Muxi spent 525 million yuan on research and development, accounting for nearly 40% of its revenue. This means for every 100 yuan earned, 40 yuan was spent on research. While this is high for mature chip companies, it is necessary for startups like Muxi. Without investment, they would be stuck with outdated technologies; however, such investment can lead to immediate losses in the short term.
- Tight Cash Flow: The company's cash flow from operating activities was negative by 1.297 billion yuan. In other words, more money was spent than was earned.
- Reasons: First, the money from selling chips (969 million yuan in accounts receivable, 73% of revenue) has not been collected, possibly due to slow payments from large customers. Second, the company prepaid a large amount to suppliers (2.196 billion yuan) to ensure a stable supply chain.
- Risks: If sales payments continue to be slow or new products fail to sell well, the company's cash flow could become critical, which could be fatal for a company that is already losing money.
4. Competition and Supply Chain Challenges: The Intense Competition and Bottlenecks in the Domestic GPU Market
Simple Explanation:
The domestic GPU market is highly competitive, with several companies vying for customers, such as large internet companies and telecom operators, who are demanding high performance, stability, and compatibility with existing software ecosystems (like NVIDIA's CUDA). Muxi has good compatibility, but the verification process is lengthy, and customers are reluctant to switch suppliers easily.
- External Restrictions: Due to foreign policy restrictions, Muxi faces limitations in advanced chip manufacturing (such as relying on TSMC) and raw materials. Although the company is working to develop its own supply chain, it faces difficulties in replacing key components (such as high-end lithography and specific materials) in the short term.
- Consequences: This means that Muxi's ability to release new products and control production costs is largely dependent on external factors. Supply chain issues could delay product launches or increase costs, weakening its competitiveness.
5. The Future Outlook: Can the Transition from Training to Inference Chips Be Successful?
Simple Explanation:
AI chips have two main uses: training (for large-scale model training, which requires a lot of computing power) and inference (for tasks like answering questions, which requires less but more frequent computing power).
- Product Timeline: Muxi's main product, Xiyun C600, was just mass-produced in May and focuses on both training and inference. The next generation of inference chips is not expected to be available until the end of 2028.
- Challenges: The company is in a critical phase of transitioning from focusing on training chips to a dual approach of both training and inference. It typically takes 1-2 years for new products to gain widespread adoption and generate stable revenue.
- Market Trends: The AI market is shifting from large-scale training to inference applications (such as AI-powered phones and PCs, intelligent customer services). If Muxi's inference chips cannot keep up with these trends or lack sufficient performance, it may miss out on this growth opportunity.
- Conclusion: Muxi's ability to turn a loss into a profit depends on the success of its Xiyun C600 and whether its next-generation inference chips can be released on time and with high quality.
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Lessons for Ordinary Investors:
1. Be Cautious of the “Stock Release Curse”: For companies on the STAR Market with high valuations and large unrealized profits, the stock release date can be a point of significant pressure on the stock price. Even if the fundamentals are strong, short-term market reactions can cause significant price fluctuations.
2. Look at Net Profit After Exclusions: Don't just focus on net profit; also consider net profit after excluding one-time gains. This reflects the company's actual ability to generate revenue. Muxi's ongoing losses in its main business indicate that its business model is not yet self-sustaining.
3. Pay Attention to Cash Flow: For growing technology companies, cash flow is more important than profit. If a company is constantly spending money and has slow revenue collection, be wary of potential financial risks.
4. Domestic substitution is a long-term trend, but there are short-term challenges: While domestic GPUs represent a national strategic priority with significant potential, they face multiple pressures in terms of technology, supply chain, and market competition. Investing in such companies requires patience and acceptance of short-term volatility and uncertainty, as they may not experience stable growth like consumer stocks.
In Summary: Muxi Shares is a leading Chinese GPU company, but it is in a challenging phase. Its profits rely on subsidies, its main business is still losing money, and it has tight cash flow. Its future success will depend on the market performance of its new products and the stability of its supply chain.